Rising Wages Cut into BPO Profits, Vietnam Market Remains Competitive
Ascension 6
November 30, 2023

Rising wages in the Business Process Outsourcing (BPO) industry are indeed starting to cut into the profits of BPO companies.

ascension 6 Rising Wages Cut into BPO Profits Vietnam Market Remains Competitive
Rising wages in the Business Process Outsourcing (BPO) industry are indeed starting to cut into the profits of BPO companies. This is supported by data from IBISWorld, which shows that the industry-wide revenue has been growing at a Compound Annual Growth Rate (CAGR) of 1.9% over the past five years. However, the growth rate seems to have slowed down in 2023, with an estimated growth of only 0.6%.
 
One of the main reasons for this slowdown in revenue growth is rising wages. BPO companies are having to pay more to attract and retain employees, which is putting pressure on their profits. Evidence for this can be found in a Money Control article, which states that an increase in wages significantly impacts total costs, affecting overall business.
 
The slowdown in revenue growth in some sectors can be attributed to the growing shift towards nearshore and offshore Business Process Outsourcing (BPO) services. As companies strive to reduce costs, they are increasingly outsourcing their operations, particularly to regions like Vietnam. This trend is driving up wages in these regions.
 

Impact on Vietnamese BPO Market


The rising wages in the BPO industry are having a mixed impact on the Vietnamese BPO market. On the one hand, the rising wages are making it more difficult for BPO companies to compete with other countries, such as India and the Philippines. On the other hand, rising wages are also leading to an increase in the quality of the workforce.

BPO companies in Vietnam are responding to the rising wages in several ways. Some companies are investing in automation to reduce their reliance on human labor. Other companies are focusing on providing higher-value services, such as customer service and technical support.

Additionally, some companies are willing to raise salaries to retain talent and stay competitive. According to VCCI News, 88% of companies in Vietnam were willing to raise salaries in 2023. This willingness to boost pay suggests that many companies recognize the value of their employees and are prepared to invest in keeping them.

The Vietnamese BPO market is expected to continue to grow in the coming years, but the growth rate is likely to be slower than in the past. BPO companies in Vietnam will need to adapt to the rising wages and the changing competitive landscape to remain successful.
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